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Analysis of Sales Volume \"You're drowning in data. Haven't you anything better to do around here than reading those re- ports? You're wasting so much paper, the next thing I know the environmentalists will be pick- eting the place,\" exclaimed Max Chernak, Seal Rite Envelope Company's new president. He had stopped by the ofce of Rose Douglas, the rm's sales manager for the past seven years, to visit with her. His opening remarks were a reac- tion to the two-foot-high stack of computer printouts spread out in front of Douglas on her desk. She stopped scanning them and looked up as Chernak walked in. Chernak was smiling as he commented on the pile of paper before her, but Douglas had been warned previously by an acquaintance who had worked for Chernak in another com- pany that he was not a big believer in paper- work. She recalled the words, \"He likes to keep things simple. He doesn't spend much time in his ofce. He always seems to be around. Dele- gation is not one of his favorite concepts.\" The Seal Rite Envelope Company of St. Louis, Missouri, manufactured and distributed a wide line of paper envelopes of all weights, sizes, and paper stock. Its sales force sold to printers, paper wholesalers, and large organiza- tions with their own operations throughout the midwestern states. Douglas was rather proud of the sales analysis system she had developed.All sales or- ders were classied by the stock numbers of the products bought, who bought them, who sold them, when they were bought, and how much gross margin was realized from the order. The data were for the previous week and previous month, all compared with sales for the same pe- riods the previous year. Any signicant changes in performance were automatically highlighted for her attention by the program. A printout of each week's sales orders and shipments was de- livered to her home each Sunday morning so she could study it in preparation for the Mon day morning sales meeting. The reports were generated on Saturday by Sharon Hamilton in SEAL RITE ENVELOPE COMPANY (A) accounting in response to Douglas's demand for them. The additional costs ($250) incurred for the reports came from Douglas's budget. Douglas felt obliged to defend her system for analyzing sales. \"I nd it helpful to have the facts about what has happened before I go into my weekly sales meeting every Monday mom- ing. I know who is selling and who isn't. I know what is selling and what isn't. And I know how much we're making on everything we sell and on every order.\" \"I see. Knowledge is power. Is that it?\" Chernak aIked. Douglas nodded slightly; she understood Ihe was under attack. Had she been too aggres- sive in defending her system, considering that she hardly knew Chernak'? Ihe wondered. The new president was not a person who avoided confrontation. He rose to the challenge. l'OK! I see that something is highlighted on that page you're looking at. What is it?\" \"Well, it seems that the saleI of item num- ber 2510 are down signicantly for the month compared to last year. We Iold hardly any of it last week. Let's see, 2510 is our heavy-duty, brown, 12-inch by 18inch mailing envelope,\" Douglas said as she read from the reports. \"So what?\" \"What do you mean, so what?\" Chernak said, I'I mean, so what? So what is the signicance of that information? So What are you going to do about it?\" Douglas knew she was in a bit of trouble, but she could not back down. \"I'll make in- quiries of the sales force to see if any of them has an explanation. Is something wrong with our product or its pricing? Is it just a random event? Does it reect a change in market re- quirements? I'll keep my eye on it to see if any- thing develops that warrants taking some action.\" Chernak replied, "That's what I call micro- management. How many of such items are there in that report that will require you to do something? Don't answer that! I'm afraid of the answer. We seem to be on different wavelengths. CHAPTER 14 Analyst ofSIlesVolume I only want to know a few things, such as our gross margins by broad product lines and sales rep. And, of course, I want to know total dollar sales. gross margins, and expenses. But I would lose all perspective if I had to deal with that vol- ume of information you are processing each week. And what about the oosts?Are they worth it? Well, as long as the prot performance of your operation keeps doing as well as it has, you can stare at that paper as long as you like if that's the way you get your kicks.\" As Chernak left her ofce, Douglas was a bit upset by the president's attitude toward her sales analysis system. She had been taught that if she took care of the details, the totals would take care of themselves. She had found that by having good, recent information about all as- pects of sales, she gained power in the organiza- tion. Her people had learned not to challenge 457 her since she could always pull out data to sup- port her position. She wanted people to know that she was on top of her job. Douglas decided to think about the matter for a while and ask some other people about her system before doing anything about it. As she looked at the stack of paper in front of her, a troubling thought crossed her mind. Was she spending too much time analysing these sales reports? Was it. all worth it? QueItions: I. How should Rose Douglas evaluate the ef- fectiveness of her sales analysis system? 2. What would you recommend she do in re- sponse to the situation in which her boss ob- viously disagrees with her attitu ward information systems
